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tv   Bloomberg Markets  Bloomberg  November 29, 2022 1:30pm-2:00pm EST

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mark: welcome to the bnn bloomberg and bloomberg audiences. i am mark crumpton with the first word news. president biden and nancy pelosi are trying to prevent a strike that would shut down the freight railroads. the white house will take up legislation to impose a labor settlement, despite the objection of unions. the president met with congressional leaders today. pres. biden: there is a lot to do, including resolving the train strike, which is what we are doing now. and congress has to act to prevent it. i think we have to do it. mark: the president is a staunch union backer who previously argued against congressional intervention in railway labor
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disputes. in the euro zone, germany, spain and belgium all reported slower inflation. that gives ammunition to those that want the european central bank to ease the pace of interest rate increases. consumer prices in germany, europe's biggest economy, rose 11.3%. that is down from october's 11.6% jump. a top qatari official has put the number of worker deaths for the tournament between 400 and 500. the number is drastically higher than any other offered by doha and will threaten rights groups. the leader of the supreme committee made the comment during an interview with british journalist piers morgan. saudi arabia is considering to make a bid to hold the 2030 fifa
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world cup. the bid had made alongside greece. it would add to the list of sporting events it is hosting as the country looks to bring its tourists. it already has the formula one race and high-profile boxing matches. global news 24 hours a day on air and on quicktake by bloomberg. powered by more than 2700 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg. jon: i am jon erlichman. welcome to "bloomberg markets." kriti: i am pretty group to -- pretty good data -- kriti gupta.
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yields are higher on the day. it is not pulling the dollar alongside with it. that is where you have seen divergence. the dollar weaker buy 1/10 of 1%, but look at the crude space. you have brent crude trading with an $83 handle. nothing to write home about but still significant on the day. jon: let's dig deeper into the e-commerce storylines. different reasons for a number of stocks in the move. amazon is down today. the market is digesting news of a debt related offering. alibaba is up close to 5%. possibly more people in china are getting vaccinated and could be encouraging. you also have big commerce.
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those shares are higher. however, areas such as footlocker are sliding. we want to get back to the u.s. rail story. nancy pelosi saying legislation will be on the house floor tomorrow in an effort to prevent a strike. ian kullgren joins us now from d.c. thank you for being with us. can you take us through those rallying to get to the finish line versus those vocal in their opposition? ian: after weeks of silence the president finally made clear his position on this issue last night and today in meetings with
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congressional leaders. that is that the time for negotiation is over. congress needs to step in and pass a rail deal to avoid what could be a crippling train stoppage before the holidays. congressional leaders fell in line with that message and nancy pelosi says there will be a house vote tomorrow on the issue. she said it will essentially be clean. there will be no "poison pills," i.e. sweeteners for the union. they need to move this as quickly as possible before december 9. kriti: speaking of, let's say that legislation is passed. worst case scenario. what could the next steps look like? do we start to see continued picketing, arrests? what does that look like? ian: the worst case scenario could take a couple of forms.
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right now, it is looking like it will probably be resolved without any actual work stoppage. there may be economic consequences with the rail companies preparing for stoppage and slowing down operations and trying to brace themselves. but at this point it is expected that the bill will get through both chambers. however, it may not be without a fight. that is because there are a number of members who have said today they are not willing to back any deal that does not include more paid sick leave for these workers. in direct response to what those unions have been asking for. kriti: ian, thank you for bringing us that perspective. let's talk about today's trading, specifically chinese stocks. they are surging as beijing vowed to speed up covert shots
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for the elderly and avoid excessive restrictions. this fueling a new round of bets china is bending to pressure for an economic reopening. joining us is jess menton. walk us through the investment case. jess: they have been rebounding and again today, if you look at shares of and alibaba that have exposure, really taking a boost on that outlook on hopes for the reopening trade. looking at what china was saying potential improvement in covid infections driving stocks. looking at the equity market, the s&p 500 and nasdaq 100, they are off of their lows. being more pressured by that big move we saw in yields tied to the direction of interest rates as far as what it means for the fed.
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we will hear from jerome powell tomorrow and that will be a key focus as far as what does that mean in december? jon: you watch a lot of the momentum in the markets and we seem set up, at least for chinese stocks in hong kong, for the biggest move since 2003. a lot of people are intrigued by that but it almost feels as soon as you get a cautious comment tied to china, we take two steps forward and one back. there could be more volatility ahead. jess: we have this back-and-forth with what is going on. goldman sachs has been looking at the realized volatility over the next month and they do not think we are going to see a lot of volatility because most of the big market moving events were frontloaded at the beginning of this month. most of the corporate earnings that came at the beginning of
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the month. but it is not until a few more weeks because we will get the cpi december 13, the day before the federal reserve's decision. even though we are thinking we could see big swings, a lot of option traders are not pricing that in because of the lack of market catalysts into the middle of december. kriti: jess, always all over the china angle. we thank you as always. let's put this together. the two largest economies seeing real vulnerability. the u.s. with the potential rail strike and china with the fallout from its zero covid policy. it factors into the fed's thinking, but does it factor into their rate hikes? bill dudley weighted in.
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-- jon: let's get some more perspective on the road ahead. how policymakers are approaching the global economy. blake gwinn from rbc capital markets, nice to have you with us. as we await comments from chair powell, we already have the opportunity to hear from john williamson and james bullard. they have been making it clear that fight against inflation seems far from done. blake: i think powell is likely to repeat that town. we heard from him in the fomc meeting and one thing i pointed out to people is in the post press conference, powell really changed the script. the prepared statement that came out on behalf of the committee and his prepared speech -- which the committee also has a degree
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of input into -- they were very dovish. it was when he got into the q&a portion and speaking his own mind that markets got that hawkish interpretation. what drove that, i think, he intimated the fed's expectations for where this ends is higher than where it was in september. he also talked about where it would be better to err on the side of hawkish and us. kriti: what does that mean for the market? you've bond yields that junk, the equity market is dovish. the next day it turns right back around. how do you price something in? blake: there is a lot of chop. we will move on these comments but, to some degree, investors have taken a backseat because of
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the uncertainty of where the fed cycle ends. several times throughout this process i think people have tried to get ahead of it and call a top in yields and gotten burned by it. that experience this close to year end when people do not want to take huge risks, that has made these moves more pronounced. people do not want to come in and take a position against it. they play out in the markets chop around. if powell delivers what we mentioned, i think that is not hugely market moving. the bigger event -- and somebody prior mentioned this -- the bigger event will be the december meeting. we do get an update to those sep projections. a lot of the risk around the fed is not necessarily the communication. these speeches, they have been fairly balanced. i think they have fallen in line with language we have seen in the minutes and the meetings.
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where we see the big market movements is when the dots move. we already had powell telling us those will have moved higher, but how much higher is the question. if those have been marked up to a high level above 5% -- dudley mentioned that -- those have been marked up closer to the top end of that range. markets would move significantly on that. jon: there is obviously a lot of conversation surrounding where the terminal rate lands. but on the qt front, you are watching trends. not just in terms of what happens but how it is impacting banks. and even funding shortages. what should we be watching closely? blake: i think this is really a 2023 story. the point where we hit a level of reserves in the system that the banking system starts to look like it is having trouble, that we are seeing scarcity on the reserve side, that happens into 2023.
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the risks to that are skewed earlier. we really do not know -- all the regulatory changes we have had since the crisis, we do not know on a day to day basis how many reserves they need to function. there is no number or target for reserves that we can be that confident of. we have to look at things, like unsecured funding markets. are banks looking like they are short of reserves? are they finding ways to replace funding? are they starting to pay up for deposits? we have to keep an eye on those things to know when that level is close. we do not have an assumption of where that number is. it is difficult to forecast. kriti: i have to ask about the top end of the range you are talking about. i am good to put you on the spot. the two-year yield looking at
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447. the market is pricing in as much as 5.5% terminal rate in early spring. does that mean the two-year yield gets to 5.5% by early spring? blake: no, because as they price and more fed, they've also priced and more cuts. the hirer it goes the faster it has to come down. that neutralizes the impact on the two-year yields. not to say they cannot go higher but the cuts will pull that down. kriti: blake gwinn of rbc capital markets, great on the spot. we thank you for your time and insight. coming up, a rare acquisition for one of canada's biggest banks. the royal bank of canada will seek to expand its power. this is bloomberg. ♪
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kriti: this is "bloomberg markets." i'm kriti gupta alongside jon erlichman. royal bank of canada agreed to by the canadian unit to operate the west coast. the deal is $10 billion in cash, $13.5 billion in canadian dollars. joining us is kevin orland. why this acquisition? kevin: royal bank of canada is already the biggest bank in canada and it is buying the seventh largest banking candida. but what royal bank gets is not just 130 branches or $134 billion in assets. as the ceo said, it is a once in a generation opportunity to leap forward in market share growth in canada. this is the kind of thing that does not happen often in canada's banking market.
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it is controlled by six dominant firms. to add 2% of market share, which they do, this is also financially compelling. they paid what most analysts are calling full price, but they can scrap out $750 million of cost energy and they can cross sell clients with new products. rbc has a higher rate of customers having all four types of banking products whereas h sbc's is half. it gets the more heavily into commercial banking, especially companies that have operations abroad that do trading. it brings them into trade finance and other areas they are not already in. it is a rare opportunity to make that big jump forward in one swoop. jon: and you have to imagine the
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company was ready to field questions about any antitrust concerns. even if we are talking about a deal that is very different from, let's say, two of the largest banks coming together. but it has been so rare to see these kinds of deals. royal was providing context on that as well. kevin: royal said -- they pointed to the fact hsbc's canada unit is 2% of the market. it does not change the overall structure of the market. they tried to play up the other competition even though it is dominated by six players. there is also 50 banks in total plus credit unions will fintechs. they tried to say it is still competitive. the finance industry said yes, this will go through the normal channels. the effect on customers will be something they will weigh on.
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rbc sounding a note of confidence it will not get hung up. kriti: this is a really interesting time to be making an acquisition. everyone is talking about a slowing global economy. is this an rbc specific story? or are we going to see these other banks dabble and buy? kevin: we have seen two of the other big canadian banks make acquisitions in the last year. last year, bmo agreed to buy bank of the west to expand u.s. operations. in february, tb bank agreed to by first horizon. those were both deals that were over $10 billion. those were the two biggest deals in canadian banking at the time. the reason we are seeing this from the canadian banks is during the early phase of the pandemic, regulators did not allow them to increase their dividends and buy back shares. they were also stockpiling
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capital in case customer's loans went bad. that did not happen. we are seeing banks having these stockpiles of capital and able to make these big acquisitions. rbc was in that position. they did not mention any need to go out and raise debt or sell extra equity. they can do this out of what they have on hand. it is an interesting time they are able to make these big deals pretty easily. jon: interesting. we will get a snapshot of how they are doing the report their quarterly results this week. thank you for your reporting to kevin orland on the big royal bank deal. coming up, housing playing a role in a canadian economic report. potentially giving rbc the ability to slow down the rate hiking. this is bloomberg. ♪ me things are good to know. me thlike, where to find the cheapest gas in town. and which supermarket gives you the most bang for your buck. something else that's good to know? if you have medicare and
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." i am jon erlichman along kriti gupta. time for what it's worth. the gdp print for candidate in september was 0.1%. the government also sang an early look at october shows groping flat. there is a cool down taking place. traders selling the loonie on that news against the greenback as there are growing expectations the bank of canada will raise at a slower rate going forward. kriti: what you are talking about, the drivers of what is driving the trade, talking about the gdp slow down. but it is still the interest rate differentials driving the trade. it is fascinating to me because this at a time when a lot of this stuff is priced in for the fed. and yet clearly, the saga is not over. let's get a check on the markets. it is still risk off across the board. the stock market down 3/10 of 1%. the nasdaq about 7/10 of 1%
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down. more markets coverage ahead. romaine and scarlet will take it from here. for jon erlichman, i am kriti gupta. this is bloomberg. ♪ as a business owner, your bottom line is always top of mind. so start saving by switching to the mobile service designed for small business:
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mark: keeping you up-to-date with news from around the world here is the first word. ukraine is improving defenses against russia over the winter. the alliance's secretary general vowed nato will stand with ukraine as long as it takes. >> this is a critical time for our security and we are sending an important message. nato is here. nato is vigilant. and nato will defend every inch of allied territory. mark: the secretary general also said the war has demonstrated what he called, "the dangerous dependence on russian gas." the bank of england governor said the u.k. government bond


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